Yallourn cutback proof carbon policies are working, ACF says

The decision by one of Victoria's biggest brown-coal-fired power stations to cut its generating capacity by a quarter is proof the carbon price and renewable energy target is succeeding in cutting greenhouse gases, an environmental group said.

According to the Australian Conservation Foundation, the decision to halt power generation at one of Yallourn's four units is evidence the government's policies are taking effect.

Flooding at the Yallourn power station earlier this year. Photo: Joe Armao

“Since the carbon price started, 3000 megawatts of dirty, coal-fired generation has been switched off, demonstrating that the carbon price and the renewable energy target are starting the process of shifting Australia from a 19th century dirty economy to a 21st century clean economy,” ACF's climate change campaign manager Tony Mohr said in a statement.

EnergyAustralia, operator of the Yallourn plant, said the fourth unit at the plant could be restarted if demand picks up, such as during summer.

"We'll be watching markets and the economics of it," Emma Tyner, a spokeswoman for EnergyAustralia, said.

EnergyAustralia blamed the carbon price for "significantly" increasing the cost of operations, while the government's target of 41,000 gigawatts of power from renewable sources by 2020 was also "acting to suppress wholesale electricity prices".

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“The current design of the Renewable Energy Target threatens the sustainability of Australia's electricity market and needs to be recalibrated in line with falling demand, easing cost pressures on Australian electricity customers,” Mark Collette, group executive manager, Energy Markets, for EnergyAustralia, said in a statement.

EnergyAustralia's decision is the latest in a series of reductions in output by coal-fired power stations. Other companies cutting back include Stanwell Corp and Alinta Energy.

Climate Change Minister Greg Combet is happy for the government to take credit - or blame - for the reduction in Yallourn's output.

"This is further evidence that the carbon price is already working to reduce greenhouse gas emissions and transform Australia’s energy sector," Mr Combet said.

He also stood by the government's renewable energy goal: "The bipartisan Renewable Energy Target remains a very important part of our Clean Energy Future package and the range of views on the operation of the scheme are being considered by the current Climate Change Authority review."

Under strain

The energy market, though, is under strain from issues other than the RET and the carbon price. Electricity demand has been in a slump since 2009.

Australia's electricity prices have risen more in the past six years than at any similar time in the country's history or in any comparable developed nation, Professor Ross Garnaut told a seminar in Melbourne on Monday.

More households and businesses have installed solar photovoltaic panels, a trend that is likely to reduce the peak-hour profit surge generators have enjoyed in the past.

The strong dollar has also forced some big power users to cut output. Norsk Hydro announced in May it would shutter its Kurri Kurri aluminium plant, and others have followed suit.

"The maximum reduction in demand in Victoria is about 600 megawatts" from its peak levels in 2008, said Mike Sandiford, director of the Melbourne Energy Institute. "That's getting on to about 10 per cent."

Wholesale power prices in the state averaged about $55 per megawatt-hour last month, roughly in line with averages over the whole year, even with the carbon price added, Professor Sandiford said.

Producers "have to get rid of capacity we don't need," he said.

'No surprise'

Green groups, such as the ACF, say coal-fired power plants have had years to prepare for a carbon price and failed to act.

“It's no surprise electricity retailers and the owners of these old generators are calling for the weakening of the renewable energy target," Mr Mohr said.

“They've had their heads in the sand for years and now find themselves caught out by the effectiveness of the renewable energy target and carbon price."

EnergyAustralia said it is too early to say if any jobs will be lost as a result of the reduction in output at Yallourn. It also said the reduction was not connected to the flooding of part of its mine operation in June after the Morwell River diversion collapsed.